The Mess in Panama

Before the United States launches a full-scale economic war against Panamanian strongman Manuel A. Noriega, policy-makers ought to consider carefully whether embargoing trade, putting Panama Canal revenues into escrow and all the other sanctions now being proposed might backfire. A little pressure on the cash-strapped economy of Panama may indeed increase disaffection with Noriega and force him out. But if the pressure is heavy-handed, his countrymen may instead blame their suffering on the Colossus of the North and rally around Noriega, leaving him more entrenched than ever.

The Reagan Administration, which is now considering a battery of economic sanctions, is jumping onto a bandwagon driven by deposed Panamanian President Eric Arturo Delvalle. Delvalle, who tried last month to fire Noriega as the commander of Panama’s Defense Forces and was himself deposed, was once ridiculed as a Noriega puppet. But he has turned out to be an effective and ingenious tactician; working with an American lawyer and Panamanian diplomats who are still loyal to him, Delvalle has led the move to seize Panamanian bank accounts and other assets in the United States.

The strategy behind these moves is sound: Delvalle hopes to squeeze Panama’s cash flow so that it can no longer pay bills or issue paychecks to civil servants and the 15,000-man Defense Forces, the core of Noriega’s support. Delvalle, in hiding somewhere in Panama, may not have to squeeze too hard: The government’s reserves of $30 million are insufficient to meet the payroll due in mid-March, let alone other obligations. The domestic banks are so short of money and so fearful of a run on their depleted deposits that they have been closed. And, for those who believe that only a military uprising can drive Noriega from power, there already are encouraging reports of more grumbling about him in the ranks as he has started firing subordinates whose loyalty he doubts.

The United States can help this movement by freezing Panamanian assets, including $50 million in bank deposits, in the United States; that would relieve Delvalle’s forces of the need to file lawsuits against every bank or corporation that deals with Noriega’s regime.

But now there are voices urging the United States to “go for the jugular,” in the words of Sen. Alfonse M. D’Amato (R-N.Y.), and impose stiffer sanctions. The legislation introduced by D’Amato and five other senators to embargo all trade and air travel strikes us as risky and probably illegal. We cannot think of a surer way to alienate Panama’s 2 million citizens than to deny them U.S. goods and access to U.S. markets; an embargo might also violate the 1977 Panama Canal treaties, which commit the United States to continue to do business with Panama.

Even more misguided, in our view, is Assistant Secretary of State Elliot Abrams’ assertion that the United States should impound a $7-million U.S. payment for the use of the canal. Wiser heads at the State Department seem to be backing away from that idea--and rightly so. Withholding canal payments would be more symbolic than financially damaging; most of the revenue pays the wages of canal employees, and only a tiny portion ends up in Panama’s treasury.

And the symbolism itself would be wretched: If the United States thrusts the canal into this struggle, it will play right into Noriega’s hands. Ever since he was indicted by two federal grand juries on drug-smuggling and money-laundering charges, he has darkly suggested that Washington was moving against him because it was unwilling to honor the canal treaties or relinquish control by the end of the century.

Noriega would like nothing more than to depict this as a David-and-Goliath struggle--a notion that would appeal to Panamanian nationalism. Thus it becomes crucial for the United States to use some finesse, to make sure--as the Panamanian economy suffers and the banking system founders--that Noriega, not Washington, is seen as the villain.